CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed 13 classes, removed one class from Rating Watch Negative and downgraded six classes of Bear Stearns Commercial Mortgage Securities Trust (BSCMS) commercial mortgage pass-through certificates series 2005-PWR10. A detailed list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The affirmations and removal of class A-M from Rating Watch Negative are the result of sufficient remaining credit enhancement and recoveries of outstanding all outstanding interest shortfalls to the remaining classes as a result of the disposition of the four loans in special servicing. In addition, the World Market Center loan (previously 9.3% of the pool) was paid off at a discount in September 2014. The loan was performing according to a modification and with the master servicer; losses to the trust were in-line with Fitch's expectations. Fitch had previously placed the A-M class on Rating Watch Negative in August 2014 due to potential interest shortfalls as a result of the upcoming discounted payoff of the World Market loans.
The downgrades to the distressed classes are the result of realized losses being incurred, or additional certainty of realized losses in the future given the reduction in credit enhancement to the junior classes.
Fitch modeled losses of 4.68% of the remaining pool; expected losses of the original pool are 13.2% including losses already incurred to date (10.4%). As of the November 2014 distribution date, the pool's aggregate principal balance has been reduced by 39.1% to $1.61 billion from $2.63 billion at issuance. Interest shortfalls in the amount of $22 million are currently affecting classes H through S.
Of the original 214 loans, 166 remain, all of which are current. The pool has maturity dates in 2015 (90.2%), 2016 (2%), 2020 (7.5%), and 2025 (0.4%). Per the servicer reporting, 19 loans (10.2% of the pool) are defeased. There are no longer any specially serviced loans.
The recently paid off World Market Center Loan, $205 million at issuance, was modified into an A/B note structure in 2011. As part of the modification, the borrower could pay off the loan without penalty prior to the maturity date in July 2015. The discounted pay-off in September resulted in a loss severity of 39% based on the original total loan amount, or 47% on the combination of the A and B note at the time of disposition.
The largest contributor to modeled losses is a mixed-use lifestyle center in Westlake (5.6% of the pool), OH, approximately 15 miles west of Cleveland's central business district. The collateral includes approximately 398,000 square feet (sf) of retail space, 84,000 sf of office space, and 158 multifamily units. The collateral continues to be well-occupied with the second quarter 2014 occupancy at 94%. However, overall performance is hindered by expenses and real estate taxes that continue to be higher than the pro forma estimates at issuance. The reported debt service coverage ratio (DSCR) is 0.82 times (x) as of June 2014 which is consistent with performance over the past couple years.
The second largest contributor to modeled losses is the 204-unit multifamily complex (1.71%), 1001 Ross Avenue, located just outside of the historic West End neighborhood of Dallas, TX. As of June 2014, the reported occupancy was 90%, which is up from 88% at year-end 2013. The loan was transferred to the special servicer in June 2009 for payment default and was modified with an extension of the interest-only period in early 2010. The loan has performed per the terms of modification and is scheduled to mature in December 2015. The property continues to exhibit weak performance metrics for its submarket and a number of deferred maintenance issues were witnessed during the last servicer inspection that impact the property's performance.
The third largest contributor to modeled losses is the 96,850 sf industrial/office building (0.38%), 3850 Royal Avenue, located in Simi Valley, CA. The building currently has its only tenant, occupying 51% of the net rentable area (NRA), on a long-term lease through 2018. The sponsor continues to cover the cashflow shortfall out of pocket as the servicer reported DSCR was 0.42x as of June 2014. The sponsor is actively marketing the vacant office suite but states that the market is highly competitive with several competing options in close proximity.
RATING SENSITIVITIES
The super senior classes and class A-M are expected to maintain their ratings due to increasing credit enhancement. As the majority of the loans mature in the latter half of 2015, additional paydown and increased credit enhancement is expected.
Fitch has downgraded the following classes as indicated:
--$19.8 million class B to 'CCsf' from 'CCCsf'; RE 0%;
--$22.8 million class C to 'Dsf' from 'CCCsf'; RE 0%;
--$0.0 million class D to 'Dsf' from 'CCsf'; RE 0%;
--$0.0 million class E to 'Dsf' from 'CCsf'; RE 0%;
--$0.0 million class F to 'Dsf' from 'CCsf'; RE 0%;
--$0.0 million class G to 'Dsf' from 'Csf'; RE 0%.
Additionally, Fitch has affirmed the following classes as indicated:
--$858.8 million class A-4 at 'AAAsf'; Outlook Stable;
--$210.7 million class A-1A at 'AAAsf'; Outlook Stable;
--$263.4 million class A-M at 'AAsf'; Outlook Stable;
--$210.7 million class A-J at 'CCCsf'; RE 90%;
Prior to today's affirmation, class A-M was on Rating Watch Negative.
Classes H, J, K, L, M, N, O, P, and Q are affirmed at 'Dsf'; RE 0%; due to realized losses. Classes A-1, A-2, A-3, A-AB have repaid in full. The ratings on the interest-only classes X-1 and X-2 were withdrawn. Fitch does not rate $0 million class S.
Contact:
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014).
Applicable Criteria and Related Research:
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=931475
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